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Write the differences between IAS 39 and IFRS 9
IFRS 9 and IAS 39 are two important accounting standards which tell how to account for financial instruments. IFRS is the recent standard which was released on 24/07/2014.
Differences
The major differences between the International Accounting Standards 39 (IAS 39) and International Financial Reporting Standards 9 (IFRS 9) are as follows−
IAS 39 | IFRS 9 | |
---|---|---|
Scope |
Its includes hedge accounting for fair value hedging interest rate risk for dynamic portfolio of financial instruments |
May apply specific hedge accounting requirements in IAS 39 (portfolio of fair value hedging of interest rate risk) |
Credit exposures |
Credit risk hedge accounting is not addressed specifically. |
An option is introduced to designate credit exposure. |
Hedging instruments (qualifying) |
For foreign currency risk, non-financial derivative financial instruments may used |
Non- derivative financial instruments (measured at FVTPL) are eligible |
Accounting for non-designated element of a derivative |
Changes in fair value of non-designated time value (option) or forward element (forward contract) are recognized immediately in profit/loss. |
Changes in fair value of time value (option) when only intrinsic value is designated are recognized as other comprehensive income (OCI) and after reclassification it is recognized in profit/loss. |
Hedged items (qualifying) |
|
|
Hedge effectiveness |
|
|
Hedge relationship (Discontinuation) |
Voluntary discontinuation is allowed. |
Voluntary discontinuation is not allowed. |
Hedge relationship ( Documentation) |
Description of ineffectiveness (source) and determination of hedge ratio is not required. |
Description of ineffectiveness (source) and determination of hedge ratio is required. |
Cash flow hedge accounting |
Basic adjustments (non-financial items) are optional. |
Basic adjustments (non-financial items) are mandatory. |
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